What is a call option?
1In one sentence
A call is the right to buy 100 shares at a set price, before a set date. You pay a small fee for that right.
You buy calls when you think a stock is going up. If it rises past your price, the call gains value. If it doesn't, you lose only the fee.
2Try it: drag the dot
Example: NVDA is $215 today. You buy the $230 call that ends in 30 days, for $4 a share ($400).
33 words to know
Strike$230
The price you get to buy at. The stock has to rise above it for the call to be worth something at the end.
Premium$400
What the call costs. It's the most you can lose.
Expiration30 days
The last day the call counts. After it, the call is either worth something or worth zero.
4Watch out
- It can go to zero. If the stock ends below the strike, you lose all of what you paid.
- Time works against you. The call loses value a little every day the stock doesn't move.
- Above the strike isn't enough. You need the stock past the break-even (strike plus what you paid) to profit.
5Quick check · 3 questions · optional
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Common questions
What is a call option?
A call option is a contract that gives you the right, but not the obligation, to buy 100 shares of a stock at a set price (the strike) before a set date (the expiration). You pay a fee for it, called the premium.
What is the most you can lose buying a call?
The premium you paid. If the stock ends below the strike at expiration, the call expires worthless and you lose that fee, nothing more.
When does a call option make money?
When the stock rises above the break-even price, which is the strike plus the premium per share. Every $1 above the break-even adds $100, because one contract covers 100 shares.
Education only. Examples use illustrative numbers. Not financial advice; you make your own decisions.